plunged Tuesday following the company's revelation Monday night that
had terminated a cancer drug development contract.
The contract had been an important source of support for the struggling Berkeley Heights, N.J., company, which has been unable to secure Food and Drug Administration approval for its drug Genasense. On May 14, Genta withdrew its application for the drug as a treatment for malignant melanoma. The move followed by 11 days a vote by an FDA advisory committee opposing approval of the drug.
On Tuesday, Genta's stock dropped 45%, losing $1.17, to trade at $1.43. Genta said it is evaluating the impact of the cancelled agreement "on cash projections," adding that it will provide financial guidance "at a later date." Genta said it will continue developing Genasense.
Genta said late Monday that Sanofi-Aventis will provide support for Genasense until May 8, 2005. The contract was announced in April 2002, when Aventis was an independent public company. It was later acquired by Sanofi-Synthelabo and the combined company was renamed Sanofi-Aventis. The contract called for the old Aventis to co-market Genasense in the U.S. and have exclusive rights to the drug in all other countries. The French company was to have provided as much as $480 million in cash, equity, milestone payments and convertible debt to Genta.
Sanofi-Aventis said Tuesday that it cancelled the agreement due to the FDA advisory committee's vote on Genasense as a melanoma treatment and to Genta's report of a late-stage clinical trial of Genasense as a therapy for advanced chronic lymphocytic leukemia (CLL).
Sanofi-Aventis said the agreement signed in 2002 was based on the belief it was buying into a "late stage development opportunity that could potentially provide for a near term launch of
Genta said late Monday that the CLL test had met its primary goal. Patients who received Genasense plus chemotherapy "were significantly more likely" to experience a complete or partial shrinking of tumors compared to patients who received only chemotherapy. However, there was no statistically significant difference in survival rates or disease progression between the two groups.
Genta said full details will be presented early next month at a meeting of the American Society of Hematology in San Diego, Calif. Genta also has been testing the drug as a treatment for multiple myeloma.
The company also announced on Tuesday that it lost $5.56 million, or 7 cents a share, on revenue of $1.4 million for the three months ended Sept. 30. That compares to the third-quarter results last year in which Genta lost $17.2 million, or 23 cents a share, on revenue of $1.3 million.
The consensus of analysts polled by Thomson First Call was a loss of $16 million, or 16 cents a share, on revenue of $1 million.
At the end of the third quarter, Genta reported that it had $36.7 million in cash, marketable securities and cash equivalents. Genta said that prior to the contract cancellation, Genta would have been able to borrow money under the Sanofi-Aventis line of credit through Dec. 31. Now, "Genta cannot borrow additional funds," and the line of credit must be repaid by May 8.
Genta also said it had $10 million in outstanding convertible debt issued in connection to the Sanofi-Aventis contract. Genta said that debt will be forgiven because its partner terminated the agreement.